Stockwatch Energy for yesterday
Energy Summary for June 30, 2022
2022-06-30 20:32 ET - Market Summary
by Stockwatch Business Reporter
West Texas Intermediate crude for August delivery lost $4.02 to $105.76 on the New York Merc, while Brent for August lost $1.45 to $114.81 (all figures in this para U.S.). Western Canadian Select traded at a discount of $18.25 to WTI, unchanged. Natural gas for August plunged $1.08 to $5.42, on bearish U.S. storage data. The TSX energy index lost 4.03 points to close at 228.97.
Oil prices took a dive today, but still closed out the first half of 2021 with a gain of roughly one-third relative to the start of the year, when they were still in the $70s (U.S.). The climb reflects ever-tightening supplies. In a largely symbolic move, at its monthly meeting today, OPEC+ agreed to a production boost of 648,000 barrels a day in August. This is only a mild increase over its previous commitment to boost production in August by 432,000 barrels a day. The group gave no clues about its plans for September and will make that decision when it holds its next meeting on Aug. 3.
Here in Canada, oil stocks fell with oil prices. Oil sands producer MEG Energy Corp. (MEG) lost 33 cents to $17.82 on 4.92 million shares, as it also came under pressure from a guidance reduction. The company warned investors last night about a "slower-than-forecast production ramp-up" related to a temporary electrical problem at its Christina Lake project. Although things are getting back to normal now, MEG has nudged its full-year production target down to a range of 92,000 to 95,000 barrels a day (compared with the prior range of 94,000 to 97,000).
Management soon brightened and talked up MEG's continuing efforts to reduce debt. Including recent note buybacks and redemptions, MEG estimated that it has now repaid $2.2-billion (U.S.) in debt since 2018. It opted not to put this figure in context, an understandable decision considering that its net debt was still lofty at $1.7-billion (U.S.) as of March 31. As it happens, $1.7-billion (U.S.) was MEG's target debt level for starting a share buyback program. The company confirmed today that it recently started buying its own shares -- just last month, according to SEDI -- and has repurchased 4.45 million so far, for a total of $94-million.
Speaking of buybacks, the Lundin promotion International Petroleum Corp. (IPCO) lost 96 cents to $12.29 on 333,700 shares, after releasing the results of the special buyback program announced last month. It will repurchase 8.25 million shares at $15.50. Originally, International Petroleum wanted to keep the price between $12 and $14, but changed the range to $13.50 to $15.50 earlier this month, setting what it felt was a better floor. The stock spent May and June bouncing around between $11.75 and $14. At no point did it get close to $15.50, so investors who tendered to the bid received a healthy premium. International Petroleum now has 142 million shares outstanding.
Over 40 million of those shares continue to be controlled by the Lundin family. Incidentally, the very name International Petroleum is a revival of one of the earliest promotions of the late Adolf Lundin, the family patriarch who died in 2006. Version one of International Petroleum was a testament to Adolf Lundin's taste for exploring the more dangerous corners of the world. Notably, it entered Sudan in 1991, looked on as a Sudanese oil find triggered the collapse of the infamous Arakis Energy in 1995, and then reached an agreement with the Sudanese government to develop that same oil find in 1997. Unfortunately, this led to denouncements of Adolf Lundin in the European press for seeking to make profits amid Sudan's then-raging civil war. International Petroleum ended up selling the controversial asset in 2003. By then, the company had been acquired by and folded into Lundin Oil, a predecessor to what is now the Norway-focused Lundin Petroleum.
Version two of International Petroleum did not surface until 2017. That year, Lundin Petroleum opted to spin out its non-Norwegian assets (mostly in Malaysia and France) into a new company, which it decided to give an old name. The differences were immediately apparent. Unlike its thrill-seeking namesake, the current International Petroleum has made a happy home in good old Western Canada, where it now gets over four-fifths of its production. It has relied heavily on acquisitions for its Canadian expansion. In the past several months, rumours have repeatedly swirled that it is on the prowl for more acquisitions, but the company has made no announcements as of yet.
In other acquisition news, Tony Marino's Tenaz Energy Corp. (TNZ) lost 10 cents to $2.31 on 3,200 shares, after tweaking the terms of its proposed takeover of the AIM-listed SDX Energy. Tenaz previously made an all-share offer for the Egypt- and Morocco-focused SDX in May. Now, "in recognition that some SDX shareholders may prefer cash" -- how considerate -- the company is offering all-cash and cash-and-share options as well.
The tone marks a slight change from the original press release on May 25, when both companies were enthralled by the "compelling opportunity for SDX shareholders ... to participate in Tenaz's growth." Presumably not all shareholders felt so compelled. Under the cash alternative, they can receive 11 pence (or about 18.5 cents) for each SDX share, rather than 0.075 of a Tenaz share. The fractional share represents a value of 17 cents, based on today's closing price of $2.31.
Considering that Tenaz's shares spent the week after the takeover announcement soaring to $2.80 from $2.19, there will likely still be plenty of investors willing to take the gamble on the all-share offer. The deal represents the first foray of the historically Alberta-focused Tenaz into international territory. The company has been scouting for international deals since it was recapitalized last year by Mr. Marino and his people, who overhauled the board and management and began hyping their plans to turn Tenaz into a global "growth and income" stalwart. The description suggests that they aim to mimic their previous, much larger promotion, the dividend-paying international producer Vermilion Energy Inc. (VET: $24.50).
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